One of the city's largest beverage distributors is planning to cut 20 percent of its workforce; grocery stores across the city are also planning to shed jobs.

It's one of those basic laws of economics: when you tax something, you get less of it.

Philadelphia is getting a crash course in what that looks like. A little less than two months after the city imposed a new tax on sugary drinks, sales of those beverages are down—way, way down—and revenue collections are too.

It's hard to have much sympathy for the city, which probably deserves to come up short on the revenue side as punishment for implementing such an obviously misguided policy. Unfortunately, the soda tax is doing more than just wrecking Mayor Jim Kenney's budget projections—it's also going to cost some Philadelphia residents their jobs.

One of the city's largest beverage distributors is planning to cut 20 percent of its workforce, Philly.com reports, and grocery stores across the city are also planning to shed jobs to make up for declining sales. It appears that the tax is causing some shoppers to drive beyond the city's borders in order to do their grocery shopping (who could have seen that coming, right?).

"In 30 years of business, there's never been a circumstance in which we've ever had a sales decline of any significant amount," Jeff Brown, chief executive officer of Brown's Super Stores, told Bloomberg. "I would describe the impact as nothing less than devastating."

For now, Kenney and other city officials seem unfazed—dismissive, even—of the problems caused by the new tax. A city spokesman told Philly.com that no one knows whether low sales figures and predicted job losses are anything more than "fear-mongering to prevent this from happening in other cities."

Kenney put an even finer point on it.

"I didn't think it was possible for the soda industry to be any greedier," Kenney said in an emailed statement to Philly.com reporter Julia Terruso. "They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women's jobs rather than marginally reduce their seven figure bonuses."

If Kenney's right, then soda manufacturers and distributors are engaged in a massive conspiracy with grocery stores and eating establishments to lie to city tax collectors, fire workers, and craft a fake narrative about the devastating effects of the Philadelphia soda tax. I suppose that's possible—all those groups did oppose the tax before it was passed, after all—but it seems far more likely that all those groups, and the city itself, are experiencing a first-hand lesson in how economic incentives work.

Consumers who don't want to pay an extra 1.5 cents per ounce for their favorite sugary drinks have a strong incentive to avoid buying soda (or juice, or iced tea, or sports drinks) in Philadelphia. They're leaving the city to buy soda, and doing the rest of their grocery shopping outside the city too. That leaves grocery stores with less revenue and creates an incentive to cut costs, which could mean laying off workers.

Or, as Pennsylvania State Rep. Stephen Bloom, a Republican, put it on Twitter:

Philadelphia planned to use the money from the tax to fund a new pre-K program in the city's public schools. That program launched even before the tax went into effect, but revenue projections after the first two months suggest the city might be left with a deficit.

There are a few caveats here. Some stores and restaurants are suspected of stockpiling sodas in December, before the tax took effect, and might have been selling off those untaxed sodas in January. That would lower the city's collections in the first month, but would suggest that revenue should rebound in the future. Philadelphia officials told City & State Pennsylvania that they suspect a 10 percent noncompliance rate is similairly dragging revenue collections down.

Even so, collections would have to double—and then some—in future months to reach expected levels. Given what grocers are saying about sales, well, that seems unlikely.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

Delivering his annual State of the City address from a North Seattle mosque, Mayor Ed Murray announced Tuesday he will seek a $55 million per-year property-tax levy to combat homelessness and a soda tax to fund education programs.

Murray’s soda tax would raise about $16 million per year. Distributors of sugary drinks would pay two cents per ounce.

Several other cities have enacted similar taxes, Murray said, mentioning San Francisco and Philadelphia.

Seattle’s tax would cover not only sodas such as Coke and Pepsi but also energy and sports drinks such as Monster, Red Bull and Gatorade, some fruit drinks such as Sunny D, and sweetened tea and coffee drinks like those sold by Arizona and Starbucks.

“”I didn’t think it was possible for the soda industry to be any greedier,” Kenney said in an emailed statement to Philly.com reporter Julia Terruso. “They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reduce their seven figure bonuses.””

I hear leftist friends say why venezuela won’t happen here. they don’t know what they are doing. blah blah.. but if one statement shows me these idiots are exactly like Chavez and maduro it couldn’t be summed up better than this one.

The quote does demonstrate great ignorance on the mayor’s part. A quick Google search reveals that Coke claims 1.8 billion bottles sold daily. Assuming a 12 oz bottle, that works out to 7.8 trillion ounces of Coke sold in a year. A maximum seven figure bonus is $9,999,999; which works out to $0.00000128 that the executive makes per ounce. The city is demanding $0.015 per ounce, or 11,718 times more than the executive makes. Who’s really the greedy party here?

I didn’t think it was possible for politicians to be any stupider. They are so committed to raising taxes that they are totally ignoring elementary economics, and they are actually willing to threaten working men and women’s jobs rather than marginally reduce the cancerous growth of government.

“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” – Thomas Sowell

The industry is greedy for passing along the tax? Consumers are going out of their way, or declining to buy soda, to avoid paying the tax? C’mon Kenney, what did you think was going to happen? And didn’t they argue that one goal was to reduce consumption of such sugary beverages?

Hey, Mayor Kenney donated another 10% of his salary to the PreK program so, of course, he thinks those who don’t also sacrifice are greedy. Oh, wait, he didn’t. Sorry, I forgot that being “greedy” is wanting to keep what you earned, and doesn’t mean “sending men with guns to collect from other people to fund your pet causes.”

This might be mentioned in one of the embedded links, but one of the distributors has a “cash and carry” distribution center in Delaware County, something like 3 blocks from the City Line. Predictably (well predictable to everyone except Kenney) small grocers go to that distribution center and buy their soda stock to avoid the tax then go sell in the City. So neither of the City’s stated reasons for implementing the tax (raise revenue from soda sales, but reduce obesity due to decreased soda sales) is accomplished. Not that we don’t all know this already, but Kenney is a dope.

When Philly got their special $2 cigarette tax from the legislature, they basically admitted that locals would buy outside the city to save money but that tourists and other visitors wouldn’t know any better and would buy smokes while in the city, so they’d make money from them.

I tihnk the soda tax is way too punitive. I don’t support it. Having said that, 20% layoffs over a soda tax makes no sense. People have to spend money on gas to drive the extra distance to save a dollar or two on soda. I just don’t see the savings worth the trouble.

Without being an insider or knowing the specifics, a 20% layoff rate at a regional beverage distributor that has traditionally had Philadelphia as a large portion of its market segment is entirely plausible.

Reading the linked Bloomberg article, some of it is purchases shifting to outside the Philadelphia city limits, but some of it is just a fairly predictable drop in demand due to a heavy tax.

Quote from that article:

“Canada Dry Delaware Valley Chief Operating Officer Bob Brockway said he expects his business will decline by at least a third over the course of the year. He distributes more than 20 percent of all soft drinks in Philadelphia market. Even though retailers just outside the city limits have gotten a sales bump, that increase isn’t enough to offset the drop in Philadelphia. Brockway said he’ll have to lay off 30 of his 165 employees in the area in March. Depending on summer sales, the layoffs will probably continue, he said.”

To put it in context, a 12 pack of 12 ounce cans of soda previously might retail at a grocery store for $2.99. The 1.5 cents per ounce tax adds $2.16 to that. That’s a big enough increase that it’s hardly surprising that it would change some people’s behavior: not simply shopping outside the city, but not drinking soda (or drinking a lot fewer sodas). And the tax also covers diet as well as sugar sweetened, so it’s not like a soft drink distributor would simply see a shift from regular to diet.

When you go outside the city to buy your soda, you stock up. If you buy 20 2-liter bottles, that’s over 20 dollars (66 oz. x 20 x 1.5 cents/oz.)

It would be worth it to drive 10 minutes, plus the added joy of giving the city government a one-finger salute. It’s the poor who are stuck and get get away from it (funny how it always seems to work that way).

Soda is covered under SNAP. 5% of SNAP sales are soda and you cant tax a SNAP sale. So the poor are not stuck with this mess. It’s probably the reason the taxers are not claiming it is a fight obesity issue. Some of the most blubbery fatsos around are on food stamps.

Plus, there’s probably a bunch of people who work in Philadelphia but live in surrounding suburbs (or vice versa). Some may have gone to the local market down the street from their office to buy soda (plus whatever groceries for dinner) then drive home. But now with the soda tax increase, they may instead opt to drive to a market that’s on the way home or close to home, outside city limits. Negligible amounts of additional gas spent to save a few bucks.

And the people who live on the bubble where it might be about the same distance between a market inside and outside of Philly may decidedly choose to go with outside Philly after the tax. Even if you live in the core of town, It’s not a far drive before you get into New Jersey.

From what little I’ve onserved, a great percentage of what a small store earns is from sales of soda. 20% layoffs doesn’t sound out of line to me, especially if the tax has people who pass outside of the city but formerly bought inside are simply stopping elsewhere on their normal route.

Yeah, a lot of the little “quickie mart” places have gas pumps just to get customers in the store to buy soda pop and candy, where the real money is. The poor bastards who own the stores don’t make shit off of gasoline sales.

If Kenney’s right, then soda manufacturers and distributors are engaged in a massive conspiracy with grocery stores and eating establishments to lie to city tax collectors, fire workers, and craft a fake narrative about the devastating effects of the Philadelphia soda tax. I suppose that’s possible?all those groups did oppose the tax before it was passed, after all?but it seems far more likely that all those groups, and the city itself, are experiencing a first-hand lesson in how economic incentives work.

Philadelphia is getting a crash course in what that looks like. A little less than two months after the city imposed a new tax on sugary drinks, sales of those beverages are down?way, way down?and revenue collections are too.

So are the bureaucrats upset that the tax is having the ostensibly desired effect? This is what they said they wanted. Of course, people are probably just going across county lines to buy their soda elsewhere.

Well, if I recall, the Mayor said the distributors were supposed to eat the tax, and not raise retail prices, while simultaneously changing people’s behavior despite no change in the price. Gibberish, in other words.

And some basic math shoots the mayor’s “eat the tax” instantly. The tax on a two-liter bottle of soda is $1. That’s about the retail sale price without the tax. So if a distributor ate the tax, he’d be paying more in tax than he’d get from selling the product to the retailer.

I got a C in both my economics courses in college, but even I know that volume can’t even overcome a case where your expenditures exceed your revenues.

Yeah, that predictably wasn’t going to happen on a lot of sales given the magnitude of the tax. Even by the standards of politicians, the mayor was abnormally stupid if he thought that was going to happen.

It’s roughly a 70% tax on the prior retail price of a 12 pack of 12 ounce soda cans in a supermarket: $2.16 of tax on something that previously retailed for perhaps $2.99. A huge percentage of that tax is going to be passed on via a higher retail price.

It might be a different story for restaurant fountain sales, which are sold at quite a bit more on a per ounce basis. I’m pretty sure that those sales also have quite a bit of margin for the restaurant. It’s conceivable in that situation that the restaurant would eat a fairly high percentage of this tax.

The incidence of the tax comes down to an economic analysis of both margins and elasticity of demand. And for soda sold as packs or 2 liters at retail, this tax was clearly well over the total profit margin for the retailer and distributor, so hardly a surprise that it was passed along to consumers.

But is the tax higher per ounce on fountain syrups, or is the tax calculated on the end product? Fountain sodas are made by mixing a concentrate with carbonated water. So it might only take 1 oz of syrup to make a 12 oz drink. So I’m guessing the tax would only be on 1 oz of concentrate for a fountain drink, where it would be on 12 oz for a can of soda. In which case the tax is relatively minor for the fountain drink.

Additionally, if people are heading out of the city to buy sugary drinks, they most likely are also buying their weekly or whatnot groceries during that trip. It wouldn’t make sense for them to make a specific trip just to buy a 12 pack of soda.

Syrup is apparently taxed on how many ounces it can make. A syrup supplier was just on the news saying his $50 container of syrup makes over 350 ounces, so the tax comes to an additional $57. Mayor Kenney thinks he should eat the tax?

All “business” taxes are paid by consumers. The taxes are simply another cost factored into the final selling price. Businesses are, in essence, just another tax collector for whatever taxes “they” pay.

It is not really gibberish. The mayor is complaining about the real reason they imposed this tax, a revenue grab, rather than the ostensible rationalization of why they imposed the tax. Unfortunately, they created a tax that does make selling soda unprofitable without significant price hikes. They got greedy and screwed up the type of tax they actually wanted and are not getting the revenues they wanted.

the Mayor said the distributors were supposed to eat the tax, and not raise retail prices, while simultaneously changing people’s behavior despite no change in the price.

This guy sounds like he may very well be the dumbest motherfucker to run for and win public office in… ever. Please, please, tell me he’s a front runner for the Democratic presidential nomination in 2020. Just for the epic lulz.

They tried a 10 cent latte tax a few years ago. It got shot down quickly and hard. See, lattes are consumed by the Right Sort of People. You know, people that drive a Prius, were “Ready for HER”, and have money in their pocket. They aren’t those inbred, trailer-trash, rednecks that drive pickups, carry guns, go to church, and drink Mountain Dew.

You know what else Progs like? Carve outs in the law for preferred groups. I expect we’ll see a carve out for Starbucks at some point in the near future. If I recall correctly, their corporate H.Q. is in Seattle? I wouldn’t be surprised if that changes if nothing else does.

“In 30 years of business, there’s never been a circumstance in which we’ve ever had a sales decline of any significant amount,” Jeff Brown, chief executive officer of Brown’s Super Stores, told Bloomberg. “I would describe the impact as nothing less than devastating.”

I’m not sure what anyone is complaining about. The city got exactly what it wanted, right? Soda use contributes to obesity, obesity ‘imposes’ costs on society, this tax has significantly reduced soda consumption.

Because it was about ‘health and safety’ right? I mean, the city didn’t really expect people to continue to buy soda at the previous rates and so went ahead and spent that money, right? Wasn’t a revenue generating scheme disguised as a public health initiative, right?

Smokers, like soda drinkers, will simply drive to the nearest place with a lower tax to get their fix. I find it hard to believe that the enlightened leaders of Philadelphia didn’t know this already, or maybe they did but didn’t care because they have solved all of the city’s other problems.

Socialist Americans (aka, 66% of your neighbors) will never learn. We have bottled beer in this country thanks to Blatz Brewing doing everything they could to avoid the federal excise tax on barrels (which, in 1880 or so was $60 dollars, or something like $1,200 today).

The issues mentioned in the article were the predictable ones. But the first one I came up with was “how many school programs are sponsored by Coca Cola, Pepsi, McDonald’s, etc. You know damn well those companies would be justified in pulling their sponsorships.” And the asshole mayor will just call them greedy instead of trying to replace them with sponsorships from Ice Mountain, Poland Spring, and Chewbacca’s Own Aragula.

It appears that the tax is causing some shoppers to drive beyond the city’s borders in order to do their grocery shopping (who could have seen that coming, right?).

Black market soda can’t be far behind. And then comes the police crackdown on the unlicensed selling of single cans of soda, and then the first “Eric Garner of black market soda.” And the progtards still won’t have learned a single thing.

“They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reduce their seven figure bonuses.”

*facepalm* HOW THE FUCK DO YOU THINK EXCISE AND CORPORATE TAXES WORK, YOU FUCKING HALF-WIT?! Jesus titty-fucking Christ, what a fucking moron. The actually elected this retard mayor? Oh wait, it’s Philly. Nevermind, they’re just getting the government they deserve.

A city should be looking out for the best interest of the people. Companies look out for the best interest of profits. Soda is horrible for humans. The regular consumption of soda is linked to numerous health problems including diabetes, heart disease, asthma, COPD and obesity. When we have citizens who sick and unable to work or under perform at their job it impacts society. I personally think the luxury tax for soda, alcohol, and cigarettes go directly to programs that help people break the addiction when and if they want help.

Addiction to what, exactly, when talking about sugar & aspartame? Is it your contention that sugar & it’s substitutes are an addictive substance? I’d love to hear more, do you have a newsletter I could subscribe to?

Everything on planet Earth can be linked to a negative health outcome, therefore life should be taxed. Oh, wait, the Obama Administration already did that. Cool.

Leaving aside that other peoples’ health is none of your fucking business, I suggest that when you do impose your idiotic taxes to “make people better” you at least have the sense to NOT whine about the inevitable economic consequences. If your tax is truly effective at altering peoples’ behavior, it won’t bring in much revenue. This isn’t the result of “greed” it’s basic economics.

The tax is only on fluids sold in the city, but at the wholesale level. Syrup, cans, big jugs, etc., bought outside the city are not taxed. Considering the EASE of modern soda machines, I could drive out and get the juice w/o the tax, bring it back and sell it in my store. The tax was never levied and is not levied at the retail sale.

“I didn’t think it was possible for the soda industry to be any greedier,” Kenney said in an emailed statement to Philly.com reporter Julia Terruso. “They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reduce their seven figure bonuses.”

Nobody can possibly be this stupid. Obviously, however, the mayor believes his constituency is this stupid. He’s the mayor of the city, I’ve only passed through it once so I’m in no position to argue with his assessment of the average IQ of the residents of Philadelphia. But it is a little odd that the mayor seems to think the people who elected him are retards without considering that this might be a poor reflection on him and his election.

Not only are sodas cheaper than other vanity drinks, but some of the brand is ingrained in multiple cultures.

For example, Mexicans love the “coca”. I think it’s one of their unofficial national drink. American stores sell Mexican cokes and pepsis (in classic glass bottles) made with cane sugar. Asian women love sprite and each of their culture have a knockoff. For some reason certain regions in America has thing for Dr. Pepper.

Who’s going to wolf down the pizzas and burgers with orange juice? Nobody.. When my family treats Mexican workers (gardening, moving things) to lunch, it’s always Chinese takeout and cans of soda. One time we gave them water I could tell them asking each other “where’s soda?” I gave them soda.

Just take a look at foods Americans and immigrants eat. You need the fizzy pop to cut through the heavy grease, sauces, and pepper based relishes.

Any word on how sales are doing in stores and restaurants right over the city line? For that matter, any word on whether rents of convenience stores and supermarkets just over the line are getting hiked?

As a personal health matter, I drink very little carbonated beverages, and instead, ply myself with two pots of coffee a week, to have the energy to pitch as a quadriplegic freelancer (see how well I compete?) Do I believe sodas cause health problems? Like any other nutrient over consumed in bulk, yes, but a regressive sin tax is not the answer, never was. Municipal authorities are over-reaching by generally forcing dietary health down residential throats. As an indigent native whose survival is precarious, you hit the nail on the head with the exhaustion of the urban left.

If I had a penny for every law passed by Democrats or Republicans that don’t line up with the laws of economics, I would be very rich and they would tax it, and then steal it via civil asset forfeiture.

There are a few caveats here. Some stores and restaurants are suspected of stockpiling sodas in December, before the tax took effect, and might have been selling off those untaxed sodas in January. That would lower the city’s collections in the first month, but would suggest that revenue should rebound in the future. Philadelphia officials told City & State Pennsylvania that they suspect a 10 percent noncompliance rate is similairly dragging revenue collections down.???? ??? ???????

I live in Philadelphia. First of all, this tax is not JUST on soda, and it’s not even just on sugar-added drinks. It applies to artificially sweetened drinks too. Diet iced tea, lemonade, Diet Coke, etc. It applies even to milk that is sold sweetened, such as chocolate or strawberry flavored. Sports drinks, Red Bull, etc. Secondly, the amount of the tax is heinous. It can easily double the cost of the product. I was especially troubled to see the comments by Mr. Brown, who owns a large number of grocery stores in and outside of Philadelphia. Grocery stores run on small margins of profit, and if he says that nothing in his years of experience has ever caused a sustained percentage drop in overall sales before this soda tax, then that is believable and cause for great concern. Plus he has the direct ability to compare the change in sales from his stores in the city vs. those outside the city. Finally, in my household we have not bought soda in the city since the tax was implemented. I work downtown and used to buy Diet Coke from the store in my building, but no more. We drive a few more minutes to a grocery store outside the city when we plan to buy soda–and of course if we do that, we go ahead and do the rest of our grocery shopping in that particular store.

I looked at the check for $8628 , I didnt believe that…my… father in law was like actualie taking home money in there spare time on there computar. . there sisters roommate haz done this for under 17 months and just cleard the morgage on there apartment and got a gorgeous Chevrolet Corvette . go to websit========= http://www.net.pro70.com

If Kenney’s right, then soda manufacturers and distributors are engaged in a massive conspiracy with grocery stores and eating establishments to lie to city tax collectors, ????? ???? 2017????? ????? fire workers, and craft a fake narrative about the devastating effects of the Philadelphia soda tax. I suppose that’s possible?all those groups did oppose the tax before it was passed, after all?but it seems far more likely that all those groups, and the city itself, are experiencing a first-hand lesson in how economic incentives work.

I live in Philadelphia. First of all, this tax is not JUST on soda, and it’s not even just on sugar-added drinks. It applies to artificially sweetened drinks too. Diet iced tea, lemonade, Diet Coke, etc. It applies even to milk that is sold sweetened, such as chocolate or strawberry flavored. Sports drinks, Red Bull, etc. Secondly, the amount of the tax is heinous. It can easily double the cost of the product. I was especially troubled to see the comments by Mr. Brown, who owns a large number of grocery stores in and outside of Philadelphia. Grocery stores run on small margins of profit, and if he says that nothing in his years of experience has ever caused a sustained percentage drop in overall sales before this soda tax, then that is believable and cause for great concern. Plus he has the direct ability to compare the change in sales from his stores in the city vs.????? ????????? ????? ???? those outside the city. Finally, in my household we have not bought soda in the city since the tax was implemented. I work downtown and used to buy Diet Coke from the store in my building, but no more. We drive a few more minutes to a grocery store outside the city when we plan to buy soda–and of course if we do that, we go ahead and do the rest of our grocery shopping in that particular store.